Last week, Dr. Ashutosh Rao from Quantum Radiology wrote an email with an interesting take on the corporate ownership of radiology practices as seen through the lens of Game Theory. He was gracious enough to allow me to share a version of it here for your enjoyment.
For decades, the unwritten covenant between private practice partners (owners) and new hires (associates) was that a practice that had been built and maintained for years by owners would be handed off to associates to build and maintain for yet another generation of partners. This prior stable equilibrium [Cooperate, Cooperate] has been disrupted (by yield-hungry investors) and we have a new stable equilibrium [Defect, Defect].
The available equilibria:
- Stable equilibrium #1 [Cooperate, Cooperate]: Practice owners build for the future. Associates build for the future.
- Unstable equilibrium #1 [Cooperate, Defect]: Practice owners build for the future. Associates won’t build for the future; they are clock-in/clock-out.
- Unstable equilibrium #2 [Defect, Cooperate]: Practice owners don’t care about the future and sell the practice for $$$. Associates who wanted to build for the future are shut out.
- Stable equilibrium #2 [Defect, Defect]: Practice owners extract what they can from the practice. Associates extract what they can from the practice.
Accusation: Owners (often pejoratively grouped as “boomers”) have screwed their associates by allowing working conditions to deteriorate and then selling out.
Accusation: Associates (often dismissed as “millennials”) just want to clock in and clock out and don’t care about the practice, so owners should sell before the practice deteriorates.
And so here we are. From “The Prisoner’s Dilemma”:
Defection always results in a better payoff than cooperation, so it is a strictly dominant strategy for both players. Mutual defection is the only strong Nash equilibrium in the game. Since the collectively ideal result of mutual cooperation is irrational from a self-interested standpoint, this Nash equilibrium is not Pareto efficient.
Thanks again to Dr. Rao.
In game theory, a Nash equilibrium is the outcome in which no player can benefit from unilaterally changing their choice. Pareto efficiency refers to a situation in which it’s not possible to make any individual better off without making someone else worse off.
The Prisoner’s dilemma is an example of a game that is not Pareto efficient: the optimal outcome for the field of radiology would be for both parties to cooperate. If only. Unfortunately, a series of individually rational choices doesn’t always lead to the best collective outcome.